Go Fashion (India) Limited (“Go Fashion”)

Go Fashion (India) Limited incorporated on September 9, 2010, is one of the largest women’s bottom-wear brands in India with a market share of approximately 8% in the branded women’s bottom-wear market in Fiscal 2020. It is engaged in the development, design, sourcing, marketing, and retailing of a range of women’s bottom-wear products under the brand, ‘Go Colors’. It is also the first company to launch a brand exclusively dedicated to women’s bottom-wear category and have leveraged this advantage to create a direct-to-consumer brand with a diversified and differentiated product portfolio of premium quality products at competitive prices.

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The company serves its customers primarily through their extensive network of 459 exclusive brand outlets (“EBOs”) (including 12 kiosks operated on a “company owned and company operated” (“COCO”) model and 11 franchise stores) that are spread across 23 states and union territories in India, as of September 30, 2021. As of September 30, 2021, they have 1,270 LFSs. In addition, they sell their products through their own website and online marketplaces and through multi-brand outlets (“MBOs”).

Promoters & Shareholding:

Prakash Kumar Saraogi, Gautam Saraogi, Rahul Saraogi, Pks Family Trust And Vks Family Trust are the company promoters.

Pre Issue Share Holding57.47%
Post Issue Share Holding52.78%

Public Issue Details:

Offer for sale: Fresh issue of approx. 2,173,913 equity shares of Rs. 2 aggregating up to Rs. 150 Cr and OFS of approx. 12,878,389 equity shares aggregating up to Rs. 863.61 Cr.

Total IPO Size: Rs. 1,013.61 Cr.

Price band: Rs. 655 – Rs. 690.

Objective: For funding roll out of 120 new EBOs (Exclusive Brand Outlets).

Bid qty: minimum of 21 shares (1 lot) for Rs. 14,490 and maximum of 13 lots.

Offer period: 17th Nov 2021 – 22nd Nov 2021.

Date of listing: 30th Nov 2021.

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Pros:

  • One of the largest women’s bottom-wear brands in India.
  • Well-diversified product portfolio.
  • Professional and experienced management team.
  • Multi-channel pan-India distribution network with a focus on EBOs, enhancing brand visibility.

Cons:

  • The company has incurred losses in Fiscal 2021.
  • The revenue of the company has been unstable in the last 3 years.
  • Dependent on third-party transportation providers for the supply of raw materials and delivery of its products.
  • It carries out operations from a single warehouse located in Southern India and any disruption in the operation of its warehouse will affects its business.

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Subscribe or avoid?

Sectorial outlook – Apparel market size in Fiscal 2020 was Rs. 447,666 crores and expected to grow at a CAGR of approximately 8.95% between Fiscal 2020 and Fiscal 2025 to reach Rs. 687,263 crores by Fiscal 2025 on the back of factors like higher brand consciousness, increasing digitization, greater purchasing power and increasing urbanization. While the apparel market has degrown by approximately 32% to reach a value of Rs. 306,225 in Fiscal 2021 due to negative impact of COVID-19 pandemic, the market is expected to recover at a higher pace of 22.4% between Fiscal 2022 and Fiscal 2025. While the CAGR of total apparel market between Fiscal 2020 and Fiscal 2025 is expected to be approximately 8.95%, the branded apparel and organized apparel retail are expected to grow at CAGR of approximately 10% and approximately 11% respectively in the same period. In other words, growth of both branded apparel share and organized apparel retail share in apparel category will outpace the overall category growth and this is expected have positive impact on the company and its business. 

The financials (revenue and net profit) are shown in graph below:

Valuation – For the last 3 years average EPS is Rs. 4.01 and the P/E is around 172x. On the upper price band of Rs 690, the EPS is negative for FY21 hence It is not possible to calculate the P/E. There are listed peers doing similar business like Page Industries which is trading P/E of 130x and other companies (like Trent Limited, Aditya Birla Fashion & Retail Limited, TCNS Clothing Company Limited) have negative EPS, hence P/E cannot be computed. However, IPO price with P/E of 172x is aggressively priced and expensive.

Recommendation – After considering all the factors we would recommend investors with high risk profile may “SUBSCRIBE” to this IPO for the possibility of listing gains. Investors with medium to long term perspective can skip this IPO as there are many more IPOs lined up in near future.

Disclaimer:

This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in now.

Also read : Market Outlook – November 2021

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